Fair Credit Reporting Act News
Reporting student loan payment mistakes can lower credit scores, throw off loan approvals, and affect debt forgiveness program eligibility
Sunday, October 13, 2024 - A borrower's credit history and financial prospects reflect in great part their student loan payments. Accurate reporting of payments helps borrowers to develop and preserve a good credit record. Errors in the way student loan payments are reported, however, can have major financial effects on anything from credit scores to future loan approvals. The damage misreporting student loan payments do to a borrower's credit score is among the most direct effects. Even one late or missed payment can significantly lower a person's credit score, even if the mistake resulted from misreporting. A reduced credit score may make it difficult for a borrower to get credit cards, new loans, or even rental property. A lower score might also cause future loan interest rates to rise, therefore costing borrowers thousands of extra dollars throughout the loan. It is advisable to seek guidance from a Fair Credit Reporting Act attorney.
The harm goes beyond credit scores. Misreport of student loan payments can potentially negatively impact borrowers depending on income-driven repayment plans or loan forgiveness programs. Many loan forgiveness schemes, including Public Service Loan Forgiveness (PSLF), call for borrowers to make a designated number of qualifying payments to be eligible for forgiveness. Should a payment be wrongly recorded as late or missed, it might not add to this total, therefore postponing or perhaps excluding the borrower from loan forgiveness. This can cause borrowers to have far more outstanding balances than expected and prolong the period of time they are under stress from student debt. Additionally confusing the refinancing procedure is misreporting. Many times, borrowers try to refinance their loans in order to get better terms or interest rates, but any bad marks on their credit report--even false ones--can make this procedure far more challenging. Lenders may see the borrower as a larger risk, which may cause rejection of the refinancing application or offer of less desirable terms including higher interest rates. This increases the financial effect of understated payments even more, making it more difficult for borrowers to get their financial circumstances under control.
Correcting reported payments can take time and be aggravating. First, borrowers have to find the error by closely reading over their credit records. Once an error is discovered, the borrower has to dispute with both the loan servicer and the credit reporting agency. Credit bureaus under the Fair Credit Reporting Act (FCRA) have thirty days to look at complaints. The erroneous information on the borrower's credit record stays there during this period, which may influence loan approvals and financial prospects. Although borrowers have the opportunity to contest inaccurate information, the procedure can be taxing and does not necessarily lead to a prompt answer. Borrowers can have legal remedies for ongoing or unresolved mistakes. Should credit reporting companies or loan servicers neglect to rectify erroneous information following a disagreement, consumers have the right to sue them under the FCRA. Legal action is a long and usually costly path most borrowers would want to avoid, although occasionally it can compel resolution.
